Trans World Posts Q1 Net Loss of $1 Million

Trans World Entertainment Corp. executives faulted a weak music and DVD release slate for a first-quarter net loss of $1 million, compared to net income of $2.5 million in the first quarter of 2004.

Although comp-store DVD sales were up 2 percent, VHS pulled the video category down for an overall 3 percent decline. The category was 28 percent of revenue. Executives are positive about growth in the games category, which was 7 percent of revenue and increased 39 percent from last year's first quarter.

“Our first-quarter sales did not meet our expectations, primarily because of disappointing sales of new release music and DVDs,” CEO Bob Higgins said. “New releases later in the quarter were disappointing, particularly in April. … The quarter was very weak in DVD, with The Incredibles being the only significant release; and we had Ray, Shark Tale, The Notebook and Meet the Fockers.”

Looking ahead to the second quarter, Trans World expects top DVD performers to be National Treasure, Phantom of the Opera, Team America: World Police, Chappelle's Show — Season 2, The Aviator, Hitch, Million Dollar Baby and Constantine.

Sales of the top 50 DVDs were down 6 percent, EVP, treasurer and CFO John Sullivan said, although catalog sales were up 5 percent from the comparable quarter of 2004.

PSP also helped to make games a bright spot.

“We expect positive comp sales in games for the balance of the year. In fact, this category should outperform our expectations as we anticipate more PSP games to be allocated by Sony and a greater number of PSP games and movies,” Higgins said, adding that the new Xbox platform from Microsoft in November should also spur sales.

Dual discs are another promising frontier, Higgins said, citing great success with the first dual-disc only release, Bruce Springsteen's “Devils & Dust” album.

“One thing that was exciting was the dual-disc category,” he said. “We think the dual-disc format will be good.”

The company continues to roll out its LVS3 listening and viewing stations, which will ultimately offer direct-to-device music downloads and in-store CD burning. That rollout will continue through 2006, Higgins said.

In the third quarter of this year, Trans World will launch a Club FYE loyalty program in its mall-based stores. The LVS3 kiosks will eventually offer members targeted recommendations similar to what online services provide today.

Plans to open 35 stores and reposition 25 more this year are on track, Sullivan said.

Trans World operates stores in 46 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico under the brands FYE, Coconuts Music and Movies, Strawberries Music, Wherehouse, CD World, Spec's, Second Spin and Planet Music.